A Public Option for Banking

Chase says that unless it goes unregulated, the poor will suffer:

“We don’t want to raise fees on our customers,” a company spokesman said. “But unfortunately, regulation is forcing us to do it. And as a result, some customers may end up unbanked.”

This statement is striking for a number of reasons, and the eye-popping earnings the bank announced on Friday don’t exactly make the company more worthy of sympathy. So I’ve spent the last week trying to figure out why I was so sure I did not believe it the instant I read it.

Read on for why this is false (and see also Felix Salmon) but note as well that if you’re concerned about poor people not having bank accounts there are a number of more straightforward ways to address this than knuckling under to Jamie Dimon.


After all, it’s easy to understand why banks aren’t super-interested in serving poor customers. The idea of getting bank deposits is to get a lot of deposits, and poor people by definition don’t have much money so the rational executive is not super-focused on them. One cut at coping with this is to focus on those firms who do have existing retail relationships with poor people. When Wal-Mart has entered the check cashing business, poor people have benefitted and I think the decision to refuse Wal-Mart’s effort to obtain a bank charter was a mistake.

But of course the most straightforward way to provide banking services to poor people is to just provide the service — create a public option for small-scale depository banking. Since postal services generally already have widespread retail operations, this is often done in collaboration with the post office and is known as “postal banking.” But in an electronic age, you don’t really need physical banks at all. Everyone could just be given an account with a $5,000 maximum on a Treasury Department computer and they could mail you an ATM card with your draft registration card when you turn 18. The accounts could pay 0 interest and wouldn’t need to offer any services beyond basic “money goes in, money goes out” and nobody would have to be “unbanked.” It would cost the government some money to administer such a system, but it would also amount to the government getting interest free loans from Treasury Bank customers so if people actually used it it would be a wash.